It’s a horrible moment - one filled with guilt, trepidation and stress. You are considering how to deal with a member of staff that’s not up to scratch. Small business owners do not have an HR department or in-house lawyer to guide them through the next steps – and external advice can be expensive. So, what are you going to do?

Susan Bernstein, a partner at law firm OGR Stock Denton, suggests the starting point should be to consider whether the problem with the employee is actually down to poor performance due to their capability, or whether it is more a question of misconduct.

“If the poor performance is due to carelessness, negligence or laziness rather than incompetence or aptitude, such as inflexibility, it could be more appropriate to treat it as a misconduct rather than a capability issue,” explains Bernstein.

Good to talk

Early-stage communication with the employee is always advisable, because issues left to fester can impact on other team members. “Ignoring the poor performance of an employee can destroy morale within a team and it may even be dangerous in a hazardous workplace if it puts employees at risk of injury,” says Bernstein.

Consider how you would approach a conversation with someone, addressing their performance. Avoid humiliating them or over-criticising – try and be constructive. Think about training and support, as these routes could be less costly than having to find a replacement.

Goals, tasks, expectations

If performance management is adopted, then these tasks, goals and expectation of the employee should be tied to time periods – and may even sit during a probationary period at the start of their employment. Remember, unfair dismissal claims cannot be brought against an employer (apart from a few exceptional circumstances) if the employee has served with them for less than two years. However, they can bring a claim against an employee for discrimination.

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Paper trail

David Greenhalgh, a partner at lawyers Joelson, recommends keeping a paper trail to document the issues. Before dismissing, a proper process needs to be followed giving the employee a chance to improve, and giving warnings if that doesn’t happen - first, second and then final. “Dismissal can then follow if the desired improvements don’t materialise after a reasonable period of time,” Greenhalgh adds. If you’ve decided they must go, then “hold it in perspective”, advises Andrew Firman, a partner at lawyers Carter Lemon Camerons.

“This is a decision you have reached as right for the business: it is one person and you can never quite know for certain where they are going to be on the spectrum of losing their job being the worst outcome, as opposed to it being something they were expecting or even welcoming.”

Getting a good egg

So, once bitten twice shy. How can you make sure you don’t have the same problems with their replacement? David Greenhalgh says that interview questions should be “consistent and designed around your company’s values”. The candidate should be asked to show how they have demonstrated each of those values.

At this stage, cross-referencing CVs with LinkedIn profiles to see whether the two are consistent should be considered, suggests lawyer Donna Martin at Mackrell Turner Garrett. Checking a candidate’s social media profiles and searching their name on the new database of employment tribunal claims are some ways of reducing the chance of you hiring a “bad egg” in the first place, concurs David Greenhalgh.

Once you have shortlisted, don’t be tempted to rush the interview process. If you have other senior staff, then get them involved – you’ll be more likely to end up with a balanced opinion. “Do not forget to ask all staff who come into contact with the candidate for their views - for example, how did they introduce themselves to the receptionist? The interview starts from the minute they enter the building,” says Donna Martin.

Effective use of probation

If you are setting a probationary period, then use it for what is intended for – to gauge the new employee’s ability to undertake the job. Gather information throughout, and don’t leave the exercise until the end of the probation.

“Effective use of a probation period can save a significant amount of time and money by utilising shorter contractual notice periods, and negating the need to go through strict, formal policies in order to ensure that the underperforming employee has not been unfairly dismissed,” explains Martin.